08 Jun 2015 Speech Green economy

Islamic Development Bank annual meeting

8 June 2015 - Maputo, Mozambique Excellences, distinguished guests, ladies and gentlemen,

As we gather today, here in Maputo, the Earth is on the verge of systemic changes unlike any we have seen before. We have entered into what some have called the "Anthropocene" - an era in which our intensive use of the planet's finite resources has a significant and measurable impact on the Earth's ecosystems. Looking at it from a Muslim point of view, we are still not living up to the "trusteeship" (khalifa) and "responsibility" (Akhirah) that God has given us upon the earth and our environment.

Climate change is arguably the most dramatic consequence of our way of life. Greenhouse gases from anthropogenic emissions - over 30 gigatonnes a year and rising - are causing widespread negative impacts on societies, economies and the environment.

Some Islamic scholars are of the view that Quaran makes reference to Climate change, notably in Surah 21, Aayaa 44 and Surah 13, ayaa 41. Ahmad Hassan for example holds the view that the current extensive melting of the ice cap was anticipated by God when he refers to `Nuqs` (decrease, lessen) of `Al Atraaf` (edges or tips) of `Al Ardh` (Earth).

In the run up to the climate conference in Paris, much of the world's attention focuses on how strongly nations commit to a framework for cutting greenhouse gas emissions-a crucial step in ensuring that the global temperature rise this century is kept below 2° Celsius compared to pre-industrial levels.

Key preoccupations from Member countries of the Islamic Development Bank most likely center on how they will cope with climate change. How will climate change affect development? How will the additional costs be covered? How to mobilize the necessary financial and human resources?

Even if we limit global temperature rise, climate change is here to stay. Countries are already facing more extreme and frequent droughts, sometimes alternating with floods, land degradation and other disastrous events. In the Middle East, the red flag has already been raised on the consequences of increasing sandstorms and their severe effects on health, economy and quality of life.

Climate change will hit hard. While the poorest countries and the weakest populations will be suffering the most, let us be clear: all countries and all classes of our society will be affected.

Therefore, all countries, regardless of their level of development need to prepare themselves.

A broader involvement of the international financial sector will be crucial to addressing that challenge, recognizing that the coping abilities of the developing countries, Least Developed Countries and Small Island Developing States are incomparably lower than those of high-income nations, making them particularly vulnerable to the impacts of climate change.

This is especially true for Africa as evidenced in the 2015 Africa Adaptation Gap report published by UNEP. The report argues that the costs for Adaptation in Africa can soar to USD 50 billion per year.

The reports indicates that Africa is the continent where a rapidly changing climate is expected to deviate earlier than across any other region from "normal" changes, having a severe impact on agricultural production, food security, human health and water availability.

And, like for most of the human and sustainable development issues, the question is going back to: yes, but who will be paying? The answers point to challenges but also many opportunities.

Investing in adaptation is critically important to save humanity from catastrophic consequences of climate change. But there are serious funding gaps.

UNEP published in 2014, at the Lima COP, the first Global Adaptation Gap Report. The report looked at three main gaps, including the finance gap. It found that there will be a significant funding gap after 2020 unless new and additional finance for adaptation is made available.

It estimated that adaptation costs may reach USD 250 500 billion annually by 2050, even if the 2 degree temperature limit is met. The current amount of public finance committed to activities with explicit adaptation objectives (estimated for the period 2012- 2013) ranges between USD 23 billion and USD 26 billion, of which 90 per cent was invested in developing countries. That's how significant the gap is.

At the climate meeting in Lima last year, a major boost was given to The Green Climate Fund as it got capitalised at more than USD 10 billion. It is however still too early to have a clear picture of how much will effectively be spent on concrete adaptation actions on the ground.

Notwithstanding the wide funding gap, it is encouraging to note a large increase of resources allocated to adaptation over the recent years; this indicates how climate change concerns are increasingly integrated in sustainable development, Green Economy and climate resilient development strategies.

Indeed, there is a growing awareness of adaptation needs at national and local levels, as the impacts of climate change are factored into budgets-although further steps are needed to ensure funding, technology and knowledge gaps are addressed fully in planning and budgeting. The largest remaining gap is in the investment in combating climate change, especially in adaptation measures.

Unless current barriers for private investments in climate-resilient societies are removed, financing for adaptation is likely to largely depend on public funds. International finance can contribute to developing countries' efforts to cope but will not suffice. Indeed, costs for adaptation will have to be borne by poor nations forcing them to divert scarce domestic resources from essential sustainable development investments.

The good news is that options exist for a comprehensive Global Response to climate change. Climate finance opens great prospects for the participation of capital markets which control trillions of dollars in assets.

Following the financial crisis, it has finally been widely acknowledged that the financial system needed reform, and be part of the solutions to serve the long-term health and sustainability of the global economy, responding to the direct challenges facing our ecosystems and changing climate. If brought to scale, the global financial system could help close the widening gap in climate change adaptation and sustainable development investment. This issue has been at the heart of the research conducted since 2014 by the UNEP Inquiry into the Design of a Sustainable Financial System. Its work in over 15 countries, so far, reveals the need to speed the transition to an inclusive sustainable economy, which requires the channelling of trillions of dollars annually into green investment and many more trillions away from pollutant and natural resource intensive investment, which will also require enablers, policy reforms and incentives for the financial markets. An encouraging example is being set by the UNEP Finance Initiative's Principles for Sustainable Insurance (PSI) - the largest collaborative initiative between the UN and the insurance industry. Its 80 members representing more than 15 per cent of world premium and USD 9 trillion in assets have pledged concrete actions on risk management, insurance products, investment and partnerships that promote disaster risk reduction, climate change adaptation and mitigation, financial inclusion and sustainable investment. However, the overall participation of the global financial system in funding climate adaptation is still modest, compared to its potential. The Agenda for 2015 - opportunities for boosting sustainable investments The advent of the Sustainable Development Goals (SDGs) to be adopted at the UN New York summit in September offers an opportunity to bring the necessary commitments and implementation tools to achieve a sustainable development and fight climate change. The new agenda, which will set the path towards 2030, integrates all three fundamental dimensions of sustainable development: the economic, environment and social. In order to be achieved, it will need strong means of implementation, mainly finance, technology facilitation and innovation. The proposed list of SDGs suggests notably that climate mitigation and adaptation will be mainstreamed across the Post-2015 Development Agenda, incorporating them into the global development roadmap, towards which the majority of development financing, both public and private, will be directed in the 15 years to come. This mainstreaming offers incredible opportunities for climate change to be at the heart of trade, innovation, technology and infrastructure development plans. Financing is critical to the success of this globally agreed pathway. The billions of dollars required for climate change adaptation are just the tip of the iceberg. Globally, investment required in water, agriculture, telecommunication, power, transport, buildings, industrial and forestry sectors is estimated to be roughly USD5-7 trillion annually . To significantly reduce the climate change risks, through mitigation efforts, an additional investment of USD13 trillion is needed between 2015 and 2030. This scale of capital mobilisation is certainly possible. For instance, since 2004 around USD2 trillion of financing have gone into the renewable energy sector globally, with investment levels rising from almost nothing to nearly half of all power sector investment today . However the capital mobilised over a decade for renewables will now be needed annually to finance the SDGs in developing countries where the annual investment gap is USD2.5 trillion. But, to focus on these incremental costs alone would be short-sighted. Reforms within the financial system are also necessary. UNEP's ongoing research indicates that a fundamental shift in the way financial markets are geared and governed for delivering on investment is required. The entire financial system - comprising more than USD 300 trillion dollars in assets - needs to be deployed to making our economies green, inclusive, and fit for purpose in delivering on improved human wellbeing and equitable development. In this process, Islamic finance, Islamic banking regulations can play a central part, with its assets growing at an annual rate of 17 per cent during the 2009-2013 period and estimated to exceed USD2 trillion in a couple of years. The principles of Islamic finance, based on collective responsibility, support a socially inclusive development with the aim of preserving the wealth by circulating it and protecting its value. Islamic financial institutions in society such as alms (zakat) and endowment (waqf) can contribute to the institutional overhaul of the global financial system necessary to enact the world's development and climate action agenda. The road to financing climate change and more broadly sustainable development, leads through institutional innovation. Multiple new solutions have already been identified by UNEP Inquiry into the Design of Sustainable Financial Systems. From Russia's energy-saving policies and India's ambitious renewable energy targets and forest-based budgeting to South Africa's Green Fund, Brazil's Sao Paulo sub-national green economy initiative and China's articulation of the Ecological Civilization. BRICS nations are already pioneering the green economy transition in their domestic contexts. In the Islamic region there are more honed innovations, such as green "Sukuk" - a form of equity instrument used in Islamic banking. There is much to be gained by learning more from and upscaling of local financial instruments that come naturally from the Islamic world and that is why UNEP is very pleased to be included in meetings such as the one today. Looking Ahead Ladies and Gentlemen, What is evident from the challenges and opportunities I have highlighted is that we need to change the way we do business. States, international organizations and the public sector in general are expected to push commitments and show genuine political will to help countries affected by climate change, disasters and environmental degradation, carrying forward agendas and policies that preserve our environment, create jobs and leave no one behind. The task at hand is too complex, too urgent and too large to handle alone. It is by working together that we will achieve our sustainable development and climate action goals. Cooperation among like minded institutions will enhance our collective impact. There is a growing number of international and regional institutions that are championing the green growth and green economy agenda. The Asian Development Bank, the African Development Bank and others have adopted the green growth agenda as part of their core strategy in recent years. The creations of the BRICS Bank and of the Asian Infrastruture Investment Bank follow the same path. They all pledge to be green. Countries around the world are taking the initiative to transform their economies into more sustainable, more resilient and more inclusive, shaping their growth trajectories around a sustainability framework. The public and private sectors have to create meaningful partnerships in order to achieve a sustainable development that leaves no one behind. And there are ample opportunities for joining forces in delivering technical, policy and capacity support to the countries of the region, building on multi-stakeholders partnerships and alliances. UNEP is facilitating cooperation and partnerships among interested institutions, including those at the national level, and welcomes the chance to engage further with the Islamic Development Bank. So, Ladies and Gentlemen, Let us join together to realise what will potentially be one of the most important changes in our international economic landscape - the reshaping of the global financial system, such that it plays a productive and emphatic role in financing sustainable development and climate action. A simple message brought from the heart of Africa says : if you want to go fast, go alone. If you want to go far, go with many . Let us go together ! Thank you very much.